Understanding the India-New Zealand FTA: Focus on Services, Employment, and Mobility Over Trade Volumes
India and New Zealand have successfully wrapped up negotiations on a free-trade agreement (FTA), marking a significant step in their economic relationship. However, experts suggest that the immediate impact on merchandise trade may be minimal, with bilateral trade projected at only $2.1 billion for FY2025. The agreement, finalized on December 22 following discussions between Prime Minister Narendra Modi and New Zealand Prime Minister Christopher Luxon, is set to be signed in the first quarter of 2026. Analysts view this FTA as a framework for deeper cooperation rather than a groundbreaking trade deal.
Limited Immediate Impact on Trade
The newly negotiated FTA is expected to have a limited effect on the current trade dynamics between India and New Zealand. According to a report from the Global Trade Research Initiative (GTRI), the total bilateral trade for FY2025 is estimated at $2.1 billion, which includes both goods and services. India’s exports to New Zealand are projected to reach $711.1 million, primarily consisting of aviation turbine fuel, textiles, pharmaceuticals, and machinery. Conversely, New Zealand’s exports to India, valued at $587.1 million, mainly comprise raw materials and agricultural inputs like wood products and coal. The report highlights that while the FTA aims to enhance trade relations, the scale of current trade suggests that it may serve more as a foundation for future cooperation.
Dairy Sector Remains Sensitive
One of the most contentious points in the negotiations was the dairy sector, which is politically sensitive in both countries. New Zealand’s dairy exports to India amounted to a mere $1.07 million in FY2025, indicating that this sector remains commercially marginal. India has consistently resisted opening its dairy market, which is vital for millions of small farmers. Ajay Srivastava, founder of GTRI, noted that India has managed to maintain its policy space in sensitive areas like dairy, which will not see significant market access under the new agreement. This cautious approach reflects India’s commitment to protecting its agricultural sectors while still pursuing broader trade objectives.
Comprehensive Coverage of the FTA
The FTA encompasses 20 chapters that address various aspects of trade, including goods and services, customs facilitation, and dispute resolution. Notably, the tariff concessions are asymmetrical; New Zealand will eliminate duties on all its tariff lines from the agreement’s inception, including around 450 lines that previously attracted tariffs on Indian exports. In contrast, India has offered market access on 70% of its tariff lines, with sensitive agricultural products managed through specific measures. The structure of these concessions illustrates India’s strategic approach to selectively open its markets while safeguarding politically sensitive sectors.
Investment and Services Opportunities
Investment is a crucial element of the FTA, with New Zealand pledging to facilitate $20 billion in foreign direct investment into India over the next 15 years. This commitment is supported by a rebalancing mechanism similar to those found in India’s agreements with other countries. Additionally, the FTA includes provisions for services and mobility, allowing for student work rights and temporary employment pathways for skilled Indian professionals. India has also offered market access in 106 service sectors. Experts emphasize that the true potential of the India-New Zealand economic relationship will depend on how both nations leverage this agreement to strengthen supply chains, enhance services trade, and foster educational partnerships. Doubling bilateral trade by 2030 will require improved business engagement, connectivity, and simplified visa processes.
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